Jim Belfiore is president of Belfiore Real Estate Consulting. Jordan Rose is president of Rose Law Group.

Jim Belfiore is president of Belfiore Real Estate Consulting. And Jordan Rose is president of Rose Law Group.

Anyone who owned a home a decade ago knows a little something about how housing values can fluctuate.

Prior to 2006, most U.S. homeowners thought home values went only one direction: up. Sure, some years prices moderated, but generally, they went up 3 percent to 5 percent, and in some years, like in 2004, 2005, and 2006, they went way up. Few expected values would crash by 30 percent to 50 percent (or more!), as they did from 2006 to 2011. Homeowners are now just recovering from the debacle known as the bursting of the housing bubble.

We can blame both the run-up in home values in the early 2000s and the decline from 2006 to 2011 on “easy” credit. Lenders, supported by politicians with the notion that homeownership was good for everyone, eased credit requirements and lowered down payments for homebuyers. Blemished credit mattered less than it previously had, and thus more people qualified to purchase homes than had previously been able to qualify.

In the early 2000s, you may even recall driving around and seeing signs advertising “no money down” in front of new home communities; these signs were plentiful. The so-called “subprime” mortgage was made to buyers that had, as the term itself suggests, lesser quality credit than “prime” buyers. To further accommodate these buyers, many lenders lowered down payments or eliminated the requirement altogether. Why would subprime mortgages be problematic, after all? Home values had only gone up for decades upon decades.

Lenders seemingly “learned” something as the housing bubble burst, as they took back homes. Giving loans to subprime buyers was a lot riskier than approving loans to prime buyers. Further, buyers with little to no equity in their biggest investment were far more likely to default on repayment than buyers putting down 20 percent or more of the cost of a home when buying.

From 2008 to 2012, the mortgage industry reeled as it repossessed hundreds of thousands of homes and resold those homes at prices lower than the mortgage debt remaining on the loans they had placed. Lenders, in turn, made it a lot tougher to attain a home loan, increasing FICO-score requirements and down payment requirements. They checked and double-checked income and debt, trying to limit downside risk.

The mortgage market is again undergoing change. Home prices have been appreciating for several years now, and lenders are again easing mortgage underwriting standards and lowering down payment requirements. We are not, though, back to the heyday 2000s.

Attaining a mortgage is certainly easier to attain than it was six years ago, but it is harder to secure than it was in 2005. Documentation requirements are more significant and FICO scores must be higher than was required back then. Getting a loan with no down payment is certainly possible, but even this is more difficult to find; more likely, a buyer purchasing a home under $294,515 in most Arizona areas will find an FHA loan attractive with a 3.5 percent down payment. Most lenders now require at least 5 percent down to purchase. Exceptions exist but you will not see the billboards advertising “no down payment” as you drive around new home communities these days.

With housing prices rising and mortgage rates still low (by historical standards), it is a great time to consider buying a home, but don’t expect to do so with poor credit and no down payment. Lenders seem to be wiser from their experience. Thank goodness!

Jim Belfiore is president of Belfiore Real Estate Consulting.

Jordan Rose is president of Rose Law Group.

(1) comment


I disagree on where the blame lands for the housing bubble. It was greed, pure and simple. Greed on the part of real estate agents putting their own interests above common sense for sub-prime borrowers (I knew a broker that PUSHED his agents to put people into the biggest house they could afford because it'd give them a larger commission, and don't worry, they can always refi their interest-only 3/1 ARM), Greed on the part of homeowners - trying to capitalize on the soaring market (it's a bit hard to blame this group, really), greed on the part of lenders (loan officers in particular) who got into bed with sleazy real estate agents and helped put under qualified first time homeowners into houses they would NEVER be able to afford once their rate adjusted and they had to pay the principal, but mostly, the absolute greed of big banks and the politicians in their pockets. What the world witnessed was the greatest transfer of wealth in America since at least the great depression. We all need to stop calling it "the housing bubble" and call it what it really was - criminal activity on the part of big banks and politicians. Do people really think that it was merely a coincidence that when the baby boomer generation was in it's prime income-producing period, FLUSH with money for retirement, houses with little left in mortgages, but tons of equity, that just by happenstance - along came this golden goose that allowed them to upgrade to that big house on the lake, or golf course, etc. while also allowing younger people to get into extremely risky 0 down ARM's and then, BAM! The bottom falls out of the entire house of cards Taking not only the equity these people had in their homes, but their savings and investments in the stock market to boot. First time home buyers were nothing but pawns in that game, most had nothing of value. But big banks KNEW that in order to inflate the market to the brink of collapse, they needed these unwitting pawns to go take out a high-risk zero down - no doc loan. Then - if there is any doubt as to what really happened here - the banks held BILLIONS in real estate (houses, buildings, etc.) and rather than liquidating it all, they took the politicians out of their pockets and said - ok, make the little guy pay for this. Just like that, YOUR tax dollars bailed out deliberately poor investments made by billionaires... and then they gave themselves bonuses with your money.

If you look at history, you can see this play out on a number of occasions... Remember the Dot Com bubble? Overnight internet millionaires - their fortunes made when large corporations bought up internet companies created by start-ups, entrepreneurs, little mom and pop shops, etc. Who funded these purchases? The same banks that you later bailed out when they took your houses.

It's about to happen again - this time, they will go after the stock market (again - for as smart as we are, we sure don't seem to learn from the past). Think about all of the hoopla around the soaring stock market - Trump LOVES to bring it up. But ask yourself "what's different now than 3 years ago? Anything of substance? REALLY?" in my opinion, the answer is no. Sooner or later that stock market that has never been higher will collapse and again, your money will vanish. Likely just in time for a democrat in shining armor to come in and save the day by recommending something like universal basic income (basically, welfare for all), for the low, low price of a 70% income tax, and thus - the enslavement (financially) of America will begin.

I'm no financial expert, just a former pawn. My opinion: live beneath your means, diversify your investments, research investment and asset protection OUTSIDE of the US, as well as inside, and NEVER use your equity to pay for something else.

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